Market Update Oct 2021


A case for optimism


A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.

– Winston Churchill


One of the best examples of eternal optimism is author J.K. Rowling’s success story. Her original Harry Potter novel was rejected 12 times before it was published. Despite these setbacks, Rowling never stopped believing in her idea. She was ultimately rewarded for her perseverance, and more often than not, investors are rewarded for their optimism.


Most major global equity markets continued their strong rally from 2020 through the first 9 months of 2021. The Canadian equity market, represented by the S&P/TSX Index, led the way with a YTD price return of 15.1% (CAD). It was closely followed by the U.S. and Europe, with the S&P 500 Index and MSCI Europe Index returning 14.7% (USD) and 14.0% (USD), respectively. Emerging markets, however, have struggled, represented by the MSCI Emerging Market Index with a return of -3.0% (USD).


There are certain factors, including the COVID-19 Delta variant that may be making investors cautious. But there may be even more reasons for optimism:


Monetary policy. The U.S. Federal Reserve has defended their very accommodative monetary policy while pointing out reasons to be confident in the economic recovery. Although it’s likely that the Fed will begin to taper or reduce the amount of bonds it buys in the coming months, it’s likely to be a gradual withdrawal from pandemic-era stimulus measures.


Peak doesn’t mean weak. Equity markets seem to be reacting more to day-to-day headline news than long-term fundamentals. News of peak of market returns from last year’s bottom suggest the best is behind us. While that may be the case, any rolling over of market data merely suggests that the growth rate is slower, rather than negative.


Markets are less expensive than earlier this year. We’ve seen a strong earnings recovery globally, which has been the primary driver of returns. Despite global markets being at or near all-time highs, share prices relative to their profits have moderated. Today, investors are paying less for each dollar of profits than they were at the beginning of the year.


Strong returns can continue. During the past 30 years, investors’ returns have been positive nearly 75% of the time on a one-year rolling basis. The average calendar-year price return for the S&P 500 Index is 12.2%, but returns are more often above 20% than negative. We expect that year-over-year earnings growth for the U.S. should still be attractive well into 2022.


Almost every success story involves some bumps along the way. When it comes to investing, the best results may come to those who keep an optimistic outlook while taking an analytical approach to their portfolio.


As always, if you have any questions about the markets or your investments, we’re here to talk.


Market Update July 2021

Economic recovery
The global economy led by the U.S. continues its gradual recovery—supported by economic reopening and COVID-19 vaccine distribution. Stronger consumption is expected through 2021 fueled by consumers with excess savings and pent-up demand for goods and services. The recovery ends as the services sector catches up to the manufacturing sector’s recovery. In this environment, average market returns are expected during the next couple of years with some upside risk.

Equity markets
The S&P 500 gained 8.2% in the quarter leading to a 14.4% return for the first 6 months of the year. Similarly, the S&P/TSX Composite Index was up 7.8% in the quarter and 15.7% for the first half of the year. S&P/TSX Composite growth was partly due to high oil prices, which were up 24% in the last 3 months and 51% in the last 6 months. The global economic recovery is expected to bring continued high demand for commodities and crude, contributing to higher S&P/TSX profitability for the rest of the year.

The United States
The U.S. economy bottomed in the summer of 2020 and shifted from contraction to recovery. Since August, the U.S. ISM purchasing managers’ index (PMI) shows a material increase in manufacturing activity on a month over month basis. Macro indicators suggest 2021 will see a strong earnings growth environment that may include a recovery back to 2019 levels, and even stronger growth with the release of pent-up demand and excess personal savings. The S&P 500 gained 8.2% in the quarter leading to a 14.3% return for the first 6 months of the year. Moving forward, equity markets often follow Newton’s First Law of Motion—an object in motion, remains in motion. Historically, when the S&P 500 Index is up more than 20% in a 6-month period, there is a 48.6% chance it will be up more than 10% in the 6 months that follow. This is a 10% higher probability than the chance it will be up more than 10% in any 6-month period.

Emerging markets
In global markets, the MSCI EAFE index was up 4.4% in the second quarter, leading to a 7.3% gain for the first 6 months of the year. The International Monetary Fund projects that many regions around the world—especially emerging and developing Asia—could grow faster than the U.S. in 2021 and 2022. On a year‑over‑year basis, global exports for the 5 largest exporters in the world seem to be improving with China leading the way.

In the near term, exceptionally low interest rates are likely to remain around the world. However, the Fed’s monetary inflation coupled with the trillions in fiscal stimulus by the U.S. federal government has resulted in a steeper yield curve. In this environment, we believe credit does well and short duration bonds outperform longer duration bonds. Credit defaults will continue through the recovery due to the effect of COVID-19 lockdowns. In this regard, security selection and careful credit analysis is of paramount importance.

As always, if you have any questions about the markets or your investments, we are here to talk.

Federal Budget Update

On April 19, 2021

Deputy Prime Minister and Minister of Finance Chrystia Freeland delivered the first Federal Budget in more than 2 years. While you’ve probably seen plenty of media coverage, I thought you would appreciate an overview related to your investments and taxes.

The budget had no new personal or corporate tax rate changes. Rather, it proposes unprecedented fiscal stimulus to support the economy without any significant revenue-generating tax measures aimed at paying for this spending. You may find interesting what wasn’t in this budget. There was no increase in the capital gains inclusion rate, no change to the principal residence exemption, no family wealth tax, nor was there any income tax rate increases for individuals or corporations. But that doesn’t necessarily mean we won’t see some of these measures in the future.

Here’s an overview of some of the proposals:

  • New tax on luxury goods. Effective January 1, 2022, this luxury tax would apply to new, personal use luxury vehicles and aircraft priced over $100,000 and boats priced over $250,000. This would apply on both purchases (both outright and financed) and leases, with the seller or lessor responsible for remitting the full amount of the federal tax owing. Further, GST/HST would be applicable to the final sale price, including the proposed luxury tax. The tax will be calculated as the lesser of 10% of the full value or 20% of the value above the applicable threshold.
  • Additional Old Age Security (OAS) benefits. Seniors who will be 75 or older as of June 2022 will receive a one-time payment of $500 in August this year. Also, as of July 2022, OAS payments for individuals 75 and older will increase by 10% on an ongoing basis.
  • Expanded Disability Tax Credit. The Disability Tax Credit (DTC) is a non-refundable tax credit that’s intended to recognize the impact of non-itemizable disability-related costs on the ability to pay tax. Starting in 2021, the eligibility criteria for the DTC is being expanded. This will also make it easier to qualify to open a Registered Disability Savings Plan.
  • Enhanced Canada Workers Benefit. The Canada Workers Benefit (CWB) is a non-taxable refundable tax credit that supplements the earnings of low- and modest-income workers and improves their work incentives. Starting in 2021, the CWB is being enhanced by increasing the “phase-in” and “phase-out” rates. Also, to improve work incentives for the secondary earner in a couple, a “secondary earner exemption” to the CWB for those with eligible spouses is being introduced. This would allow the spouse or common-law partner with the lower income to exclude up to $14,000 of their working income in the calculation of their adjusted net income.
  • Extended COVID-19 recovery benefits. The budget includes an extension of up to 12 weeks to the Canada Recovery Benefit and 4 weeks to the Canada Recovery Caregiving Benefit.
  • Flexible tax treatment of COVID-19 benefits. The COVID-19 benefit amounts (e.g. the suite of emergency and recovery benefits) are normally taxable as ordinary income at the recipient’s marginal tax rate. Generally, where an individual wasn’t eligible for a benefit, the subsequent repayment amount can only be deducted from income in the year the repayment takes place. Where the repayment year differs from the year the benefit is received, an individual may owe tax on the benefit income in one year while obtaining a deduction for the repayment amount in another year. The budget proposes to allow individuals the option to claim a deduction of the repayment of a COVID‑19 benefit when calculating their income for the year in which the benefit income was received rather than the year in which the repayment was made. This would be available for benefits repaid at any time before 2023.

I hope you found these highlights helpful. As always, if you have any questions about the markets or your investments, we’re here to talk.

2021 Q1 Market Update

A year after the pandemic low, the economy is set to surge.

March 23 marked the one-year anniversary of the market low brought on by the pandemic. Since then, the S&P 500 has seen its largest 12-month gain since 1936, exceeding the recovery in 2010 from the global financial crisis. Equity markets performed well through the first quarter, extending the gains made since March last year. The S&P/TSX rose 7.3%, while the S&P 500, Nasdaq and MSCI EAFE respectively gained 5.8%, 2.8% and 2.8% in U.S. dollar terms. Perhaps the biggest surprise to the market was the increase in bond yields. The U.S.10-Year Treasury Yield started the year at 0.91% and very quickly rose by 83 basis points to end the quarter at 1.74%. The 10-Year Government of Canada bond yield gained 88 basis points to finish the quarter at 1.56%. 

An optimistic outlook

The story for the first quarter has been one of optimism surrounding the reopening of the global economy. Vaccinations are rolling out, with more than 693 million doses administered across 165 countries. In the U.S., which has suffered the highest death toll from the virus, more than 168 million doses have been given, and almost 18% of the population is fully vaccinated. Further boosting hope in the States is another round of stimulus, with cheques on their way to over 100 million people.

We’re forecasting sustained higher inflation through 2021 with only some moderation in early 2022. Evidence of higher inflation is already making its way through the economic data as prices surge for raw materials. Lumber, one of the biggest costs in home building after land and labour, has never been more expensive and is more than twice the typical price for this time of year. Crude oil, a starting point for paint, drain pipe, roof shingles, and flooring, has shot up more than 80% since October. Copper, which carries water and electricity throughout homes, costs about a third more than it did in the fall. Given the low levels of business inventories combined with the backlog of orders and unusually strong demand, the direction for inflation is most likely higher, not lower.

Economic growth

We expect economic momentum to continue, driven by several factors: a rapid reopen of the U.S. and global economies due to increased vaccine availability; fiscal and monetary stimulus; pent-up consumer demand; and massive savings. On fiscal stimulus alone, at the end of December 2020, governments around the world had committed US$7.8 trillion in foregone revenues or fiscal spending programs, with an additional US$6 trillion in liquidity support. Historically, fiscal stimulus can take months to years to fully work its way through economies. We believe we’ll continue to feel the positive effect of this stimulus through the remainder of this year and into 2022.

As always, if you have any questions about the markets or your investments, we are here to talk.

Jan 2021 Market Update

What a year!

2020 will go down as one for the history books. The first reports of a mysterious virus quickly turned into a pandemic, global shutdown and the worst economic crisis since the Great Depression. And yet, by the end of the year, markets had recovered beyond expectations.

In March, all eyes were on the S&P 500, S&P/TSX, Nasdaq, and MSCI EAFE Indices as they fell approximately 34%, 37%, 30%, and 34% respectively. Every economic downturn in history has led to an upturn, and this time was no different – except perhaps the speed at which the drop and rebound occurred. The S&P 500 closed at the end of 2020 with a record high price index of 16.3% year to date, and the S&P/TSX, Nasdaq, and MSCI EAFE year-end price indices were 2.2%, 43.6%, and 5.4% respectively.

For investors, the best opportunity occurs when equities fall 30% or more from their peaks, and this proved true again last year in terms of returns from the bottom. While that ideal bottom of the market investment opportunity has passed, we’re still optimistic about the year ahead. There’s reason to believe that the economic environment in Canada, the U.S. and internationally will be much improved from 2020. A few points worth noting:

  • Coronavirus. Areas of Canada and the U.S., along with several European nations, are experiencing a second round of lockdown. However, there’s far less uncertainty this time around. We know what to expect and we know it works. There’s also light at the end of the tunnel as vaccines are continuing to roll out in several countries.
  • Canadian dollar. We believe the CAD will continue to rise relative to the U.S. dollar (USD). As oil prices continue to trend higher, we anticipate the loonie trading at US$0.79 over the course of the next 6–12 months.
  • Thematic investing. There’s increasing interest in this type of investing, which looks at long-term trends and identifies opportunities based on where the world may be heading. Not surprisingly, we’re seeing increased attention in the areas of pharmaceutical, health, digital initiatives, and e-commerce. Environmental, social, and governance (ESG) investing, and plant-based nutrition are also areas to watch.
  • Inflation. Prices will continue to rise in 2021, however, central banks will likely keep interest rates low until well into 2022.

This is not a time to sit on the sidelines, but a time to make calculated investment decisions. And if the markets do pull back at some point early in 2021, remember what happened last year and be ready to take advantage of any investment opportunities.

As always, if you have questions about the markets or your investments, we’re here to talk.


Oct 2020 Market Update

Global markets continued their recovery during the summer, followed by a slight pullback in September.

In Canada, the S&P/TSX Composite Total Return Index carried on with its strong rebound before stumbling in September, finishing with a return of 4.7%, including dividends in the third quarter. Following the sharpest quarterly contraction in GDP on record, U.S. equity markets continued their strongest rally from a bear market in history. The S&P 500, Dow Jones and Nasdaq all surpassed their pre-COVID highs, respectively jumping 8.9%, 8.2% and 11.2% in U.S. dollar terms, on a total return basis during the third quarter. In overseas markets, international equities rallied 4.9 % in U.S. dollar terms as measured by the MSCI EAFE Index, including dividends during the same period.

Here’s a look at some of the issues that made their mark this quarter:

  • Coronavirus. Worldwide markets reacted to improvements in COVID-19 cases for much of the quarter, looking to better days ahead. The U.S. economy has started to reopen and recover and is likely no longer in a recession. We’re starting to see a second wave of COVID-19 cases in Canada, Europe and other regions while the U.S. is still deep in its first wave. Uncertainty over what the economic consequences will be, and the potential for a vaccine and its global distribution will likely lead to increased volatility.
  • Seasonality. September is typically the worst month in terms of performance, and this year was no exception. Since 1950, September has recorded the worst monthly return on average for the S&P 500 Index. International equities also wavered during September.
  • Oil. The price of oil was essentially flat for the quarter, at approximately US$40 a barrel as measured by West Texas Intermediate (WTI). A lower demand for crude is likely to keep prices below their 2020 highs and may be a drag on the energy sector.
  • Interest rates. Global central banks continued their monetary policy support, maintaining short-term interest rates near historical lows.
  • Geopolitical issues. Renewed fears surrounding the Brexit deal hampered returns across Europe, while better than expected economic data out of China during the third quarter, buoyed equity markets in Asia. Renewed trade tensions between China and the United States, and the upcoming U.S. election contributed to volatility.

The next couple of months may be particularly unstable with the U.S. election coming in November. In presidential election years since 1952, October holds the worst monthly average return for the S&P 500. But in years following an election, the S&P 500 has averaged 11.4%, regardless of the election outcome. We need to remember to put political emotions aside when making investment decisions.

The great pause has given way to a recovery, but we believe this recovery has three stages: alarm, resistance, and exhaustion. If we’ve entered the exhaustion phase, as we believe, then we should expect market returns to be average over the next twelve months. 

A bright light may be in emerging markets, as earnings momentum seems to be stronger in China, Korea, and Taiwan than elsewhere in the world.

Selectivity and a long-term outlook may be the keys to successful investing globally and here at home. While trying not to sound too optimistic, we believe we will be well on the path to recovery by the end of 2021.

As always, if you have questions about the markets or your investments, we're here to talk.

Aug 6, 2020 Market Update

Three stages of the global recovery — an outlook from Manulife Investment Management’s chief economist Frances Donald, Managing Director, Global Chief Economist, and Global Head of Macroeconomic Strategy explains why she believes the pandemic will play out in three stages and will accelerate macrotrends already at work.

Read the article from Manulife Investment Management’s chief economist:

The three stages of the global economic recovery

*Manulife Securities related companies are 100% owned by The Manufacturers Life Insurance Company (MLI) which is 100% owned by the Manulife Financial Corporation, a publicly traded company. Details regarding all affiliated companies of MLI can be found on the Manulife Securities website at

Manulife Securities Incorporated and Manulife Securities Investment Services Inc. do not make any representation that the information provided in third party articles is accurate and will not accept any responsibility or liability for any inaccuracies in the information or content of any third-party articles. Any opinion or advice expressed in the third-party article, including the opinion of a Manulife Securities Advisor, should not be construed as, and may not reflect the opinion or advice of Manulife Securities. The third-party articles are provided for information purposes only and are not meant to provide legal, accounting or account advice.


July 8, 2020 Market Update

July 8, 2020

The stock markets in 2020 have resembled riding a wild roller coaster for investors. Despite a very weak economic outlook earlier in the year due to uncertainty surrounding the coronavirus, major global stock markets have recovered most of their losses for the year. Investor sentiment seems to have improved due to several reasons:

  • Government support: Interest rates have been cut to nearly zero in many developed economies. As well, governments have created many programs that have deployed billions of dollars of support for individuals, corporations and municipalities.  
  • End of lockdown: Many countries, initially led by China and Germany and later joined by the United States, have begun to slowly reopen their economies. 
  • Health care: There have been positive developments on the health care front. Reports indicate there’s a possibility the average length of time to develop a vaccine has been shortened along with encouraging news surrounding drug therapies.

The market recovery has been broad-based and not limited to any one country. In Canada, the S&P/TSX Composite Price Index has rallied 16.0% in the past 3 months for a year-to-date return of -9.1%. In the United States, the S&P 500, Dow Jones, and Nasdaq Price Indices have rallied 20.0%, 17.8% and 30.6% for a year-to-date return of -4.0%, -9.6%, and 12.1% in U.S. dollar terms. In overseas markets, international equities were up 14.2% in the last 3 months, in U.S. dollars as measured by the MSCI EAFE Price Index, for a year-to-date return of -12.6%. 

  1. March, the Canadian mutual fund industry had its worst month ever, in dollar terms, as it saw more than $14.1 billion in net selling. Investors who followed a disciplined approach and stuck with their investment plan have seen their portfolios regain most of the losses. In times of uncertainty, it’s crucial to remain focused on your long-term goals and avoid costly mistakes that are often dictated by emotion.

The potential good news is that the worst is likely behind us. Social distancing measures, travel restrictions and a better resourced health care network mean we’re better prepared for potential future outbreaks of COVID-19. But the economic recovery will be gradual as we reemerge slowly and adapt to the new normal.

Historically, the bottoming period during a recession lasts for several quarters, rather than several months, and we believe this time is no different. Recovery may look like a two step forward, one step back process as economies slowly reopen, which will likely lead to market ups and downs over the coming months.

And so, the message remains the same: Remove emotion from decision making, focus on your long-term goals, and take the opportunity to rebalance your portfolio. Avoid selling investments when markets are low–instead, commit to investing smaller amounts on a regular basis over the next 6-12 months, to take advantage of potential market upswings while mitigating any downside risks.

As always, if you have questions about the markets or your investments, we’re here to talk.

April 23, 2020

Protecting yourself and loved ones from fraud during these extraordinary times.

Times of crisis can bring out the best in people, unfortunately, it can also bring out the worst.

According to the Canadian Anti-Fraud Centre, there have been a number of COVID-19 related scams aimed at the most vulnerable by taking advantage of fear and misinformation. It’s important to keep yourself and your loved ones, especially those who may be more susceptible to fraud, armed with the facts.

Here are some scams that are being used to take advantage of people during the COVID-19 crisis:

  • Emails, phone calls and text messages encouraging seniors to apply for COVID-related government benefits.
  • A version of the CRA scam where fraudsters threaten that your provincial medical benefits have run out, or are running out, and you need to send money to reinstate them or to buy private medical insurance.
  • A phone call from someone posing as a representative from a provincial or municipal health authority saying you have been found to either have COVID-19 or have been exposed to it. The caller then asks for your credit card to pay for testing or results.
  • A phone call from someone posing as a Canada Post or UPS representative saying you have a package (often international) that they’ve attempted to deliver but you need to pay duty or shipping first.
  • Fake financial planners calling about opportunities to boost your investment portfolio after losses due to COVID-19.
  • Fake bank messages asking for a social insurance number and banking information to set up direct deposit for government funds due to COVID-19.
  • Websites asking for credit card donations to help purchase personal protective equipment for front line health care workers.
  • A phone call from a fake community organization claiming they’re trying to help socially isolated seniors. In some cases, these callers are trying to identify vulnerable seniors to gain access to their home to sell them things or steal their personal information.
  • Romance scams through social media and online dating sites targeting seniors who may feel lonely due to isolation during the crisis.

There are also legitimate organizations reaching out to vulnerable seniors during the crisis. It’s important to verify that the organization you're dealing with is legitimate before you take any other action. And never give out your financial information.

If you think you or a loved one may have fallen prey to a scam or want to learn more about how to protect against fraud, I encourage you to visit trusted sources of information, including the Canadian Anti-Fraud Centre.

As always, if you have questions about the markets or your investments, we’re here to talk.